- Instructor: Attorney Bob Schaller
- Lectures: 5
- Quizzes: 1
Offer in Compromise Offer Amount Formula.
The three types of Offer in Compromise are as follows: (a) compromise based on “doubt as to collectibility”; (b) compromise based on “doubt as to liability”; and (c) compromise that promotes effective tax administration. 26 C.F.R. § 301.7122-1(b); Johnson v. Commission of Internal Revenue, 136 T.C. 475, 485 (2011).
This course focuses on compromised based on “doubt as to collectability.” The IRS may compromise a tax liability based on doubt as to collectibility where the taxpayer’s assets and income are less than the full amount of the liability. 26 C.F.R. § 301.7122-1(b)(2). Under the IRS’ administrative procedures, an Offer in Compromise based on doubt as to collectibility will be acceptable only if it reflects the taxpayer’s reasonable collection potential. Johnson v. Commission of Internal Revenue, 136 T.C. 475, 485 (2011).
The IRS has established mathematical formulas that calculate the IRS’ reasonable collection potential (“RCP”) and dictate the amount a taxpayer must offer to compromise the tax liability based on “doubt as to collectibility.”
Overview of OIC Offer Amount Formula
Reasonable Collection Potential Calculation
RCP amount for Lump-Sum Payment Offer
RCP amount for Periodic Payment Offer